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Diploma in Business
Unit Number and Title
Unit 1 Business Environment on Primark
The first task in this business environment on primark assignment deals with the purposes of organizations belonging to different industries. The company in question is Primark and its responsibilities towards its stakeholders have been studied along with the company’s measures to fulfill them. The next part deals with the various economic systems of different countries and how they affect the allocation of resources. UK also experiences certain regulatory and competition policies for the smooth functioning of the companies. The pricing and output decisions vary with the different market structures. Lastly, a special focus has been given on the policies that are laid down by the European Union and the impact of Brexit.
The company, Primark, is a subsidiary of ABF or Associated British Foods Groups which is a reputed international group of companies. The headquarters of Primark is in Ireland but the company operates in several European countries. It is a retailer which deals in merchandise and offers customers all over Europe with a diverse range of fashionable garments. One of the biggest retailers in Europe, the company has around 238 stores in the continent. It has been noticed that companies of different sectors have objectives which differ from one other. This particular organization is a private company which aims to expand its profit share (Gbadamosi, Bathgate and Nwankwo, 2013). In the private sector, all the companies strive to increase their market share which affects their profit margins. Primark has not limited itself in producing fashionable garments. It also provides other commodities to the consumers like beauty products, confectionaries, footwear, home ware, etc. The following are the main purposes of the company:
The purposes of organizations within the following categories are as follows:
Stakeholders are the people who remain associated with a particular firm in the expectation of certain returns. They can be of two types, internal and external. Internal stakeholders are the ones who are involved in the business of the firm like managers, shareholders, employees, etc. and the external stakeholders are not directly linked to the functioning of the firm but are affected in some way or the other. External stakeholders are the government, suppliers and the consumers (Coombs, 2014). Like other organizations, Primark also has several responsibilities to fulfill the expectations of its employees. The company uses certain strategies to fulfill them which are as follows:
Each and every organization has responsibilities to fulfill. These duties are mainly directed towards the company’s stakeholders, government as well as the environment. Primark also has same responsibilities and undertakes different strategies to meet them. Its responsibilities are as follows:
Following are the strategies that are undertaken by Primark to fulfill its responsibilities:
A number of economic systems are present all over the world. In UK, the resource allocation varies with these systems which are mentioned below:
You are required to assess the impact of fiscal and monetary policy on the following type of businesses
Fiscal Policy: It is the policy of the government where the government itself or the enterprises that are owned by it take the necessary decisions. These decisions are mainly taken with respect to the collection of revenue as well as its utilization. The government finds out creative ways to use the extra revenue when a surplus amount is available.
Monetary Policy: It deals with the power of the government regarding the handling of finances and money. A diverse range of factors form a part of this policy which ranges from interest rates, supply of money and credit and so on (Hansen, 2013).
Following are the impacts of these two policies on farming and housing:
You are required to identify at least five competition policy and other regulatory mechanisms in the UK and evaluate their impact on the activities of a selected organization(s).
Competition policies help the organizations with several opportunities for the purpose of stabilizing their economic condition. In order to increase job opportunities and to safeguard customers from exploitation, competition policies are important. Monopoly markets cease to exist because of such policies. GSK or GlaxoSmithKline is one such company in the UK which earns high level of revenue through the business of medicinal products. It has a number of competitors. The main competition policies are as follows:
The market structures like perfect competition, oligopoly, monopoly and duopoly are determined by the prices and output decisions of different organizations. The number of manufacturers and purchasers are distinct for each of these markets. Even in United Kingdom, different companies fall within each of these market structures.
Demand- The amount of any commodity that the customers are willing to buy is known as demand. It depends on price. A curve can be drawn to explain the relation between price and the quantity demanded which is known as the demand curve.
Fig 1: The Demand of a product varying with quantity (Schmitz, 2012)
Supply- Supply is the amount of any product that the organizations are eager to produce for the customers at a certain amount of price. A supply curve can also be drawn to explain this relationship.
Fig 2: The Supply Curve (Schmitz, 2012)
For the proper functioning of a company, it needs to balance between these two market forces. Demand and supply work together and are dependent on certain factors. Often companies find it advantageous to limit the supply of their product during situations of high demand which would lead to an increase of the price level. For example, GSK was held responsible for the limitation of Ebola vaccines when the virus of the same name started to spread in the country (Hayden, 2016). But organizations like NHS and Red Cross took help of this situation to generate revenue by decreasing the price of the vaccines and drawing more customers. It can be concluded that both demand and supply are affected by the prices of products and vice versa.
Even companies like Tesco change the prices of their products at regular intervals because of the presence of a number of competing organizations. The company’s products which are of daily usage are affordable in nature. The management provides consumers with club cards so that they are able to get discounts and gather points. It also decides to lessen certain prices for increasing the demand of those products. For example, the decision of Tesco to raise the price of the bed rolls was a result of the increase in the prices or rice and wheat globally. With an increase in the cost of production, the selling price also increased which led to a decrease in the demand. Therefore, price and demand are interdependent on each other.
Due to an increase in the demand of healthy food habits, McDonald’s is facing a demand for antibiotic free food products (Frost, 2015). The company is making products which do not contain ingredients that are genetically engineered. Healthy eating habits are also proving to be harmful for soft drinks companies like Coca Cola. Therefore, it is evident that both the demand and supply of products depend on the price and vice versa.
The behaviour of any organization is determined by both business and cultural environments. The changes that occur in the profits and sales rates constitute the cultural factors. Brand reputation is also an important factor that affects the behaviour of a firm. In GSK, a large number of the employees belong to different parts of the world. Therefore, the workplace environment of GSK comprises of the different races and religions of the world. The culture of the workplace is determined by a mix of the traditions and values. The presence of both men and women in the workplace is also an important factor. Often, cultural differences prove to be harmful for the profit making motives of the company as the employees may not agree to work in harmony with each other (Cummings and Worley, 2014). So, when a company like GSK takes the decision of opening a firm in a country, it will have to keep in mind the cultural practices of that particular place for the smooth functioning of the company.
The types of business environment are as follows:
As mentioned earlier, the environment of the workplace of GSK is determined by the cultural practices which are present in the countries where the company has decided to set up its branch. For example, GSK faced a lot of trouble in China because the company’s managerial authorities were accused to bribe the Chinese doctors in return of the promotion of GSKs medicines by these doctors (Kessel, 2014). This particular incident led to the closing of the company’s Shanghai office and was also heavily penalized. A conclusion can be drawn that cultural and business environments are responsible for shaping the behaviour of any organization just like the case of GSK.
Companies all over the world are provided with a platform for doing business which is known as international trade practices. Companies are able to earn revenue in foreign currency which increases the profit margins of the company. Brand awareness is also an important result of the international trade as more and more people become aware of this. The importances of international trade to UK organizations are as follows:
The international market: AstraZeneca (AZ) and GSK are pharmaceutical companies which have the permission of taking part in the international trade. Such companies plan their products as per the taste and preference patterns of people in foreign countries (Helpmanand Razin, 2014). For examples, GSK has decided to sell their medicines at low prices in developing and underdeveloped nations so that people in those countries are able to purchase these. Even Tesco has a great number of branches in foreign countries which enable it to earn profit and become one of the largest retail companies present internationally.
Availability of cheap labour: These UK companies provide employment to a lot of people from the Asian and other economically backward countries. It is because cost-effective labour is available in these countries resulting in the reduction of the cost of production. Nestle made headlines when the company was accused of using child labour in the cocoa fields of Ghana and Ivory Coast. This shows the drawbacks of international trade as well.
Availability of raw materials at extremely low prices: Certain raw materials can be found at low prices in the foreign countries. The companies make use of these cost-effective raw materials to decrease their cost per unit of production. When raw materials are available locally, production processes become easier. It has certain disadvantages also. The chocolate company, Nestle, uses Ivory Coast’s extensive cocoa fields for the production of chocolates at low cost of production. The production cost is definitely reduced but the excessive use of raw materials can be harmful for the country.
Creating brand awareness among people: People all over the world gain knowledge of certain international brands due to the functioning of the international trade (Feenstra, 2015). The people who live in the Asian countries are aware about the medicinal products that are manufactured in companies like AZ and GSK. Even McDonald’s decision of making chicken burger instead of beef burger has earned the company a lot of reputation because the menu is made according to the cultural practices of the country.
The organizations which are present in UK as well as in other countries are affected by political, economical, legal, ecological and social factors. These factors have both advantages and disadvantages. Due to an increase in the rate of competition, the companies are always at a threat
When the European countries experienced the outbreak of Ebola viruses, GSK started to accumulate huge amounts of revenue by selling the Ebola vaccines (Ficenec, 2015). The profit amount exceeded the target that had been expected. The company also gained from the selling of HIV drugs in the year 2015 at an international level. In spite of all the successes, it cannot be ignored that the extreme production of medicines has its impact on the environment. AstraZeneca developed a tracking system known as the ‘ecopharmavigilance’ which helped in the recording of new data as soon as it entered the environment because of the production process of the organization. People have started to respect the company due to their measure of checking pollution. But the scandal of bribery which took place in China was a great blow to the reputation of the UK based GlaxoSmithKline through the closing of the company’s office at Shanghai. Even the US license of AZ was cancelled in 2014 (Owens, 2015).
When Europe was facing the shortage of eggs post the occurrence of bird flu in the continent, McDonald’s came up with its offers on breakfast meals. This scheme was available throughout the day and the meals also consisted of eggs. It was suspected that such a business strategy of McDonald’s could increase the shortage of eggs in the market. Russia’s request in the 1990s to McDonald’s was to change the overall look of the stores that were present in the country in accordance with the country’s culture. Even China was not far behind in making a similar request when the country asked to makes the designs of the outlets much more oriental in nature.
The main reason that allowed the company, McDonald’s, to become successful was the advancement it made in the technological sphere. The company has been producing food in huge amounts in countries all across the world. It takes care of the cultural preferences of the country like the introduction of chicken burgers in India instead of beef (Kannan, 2014). This detailed study of the culture of a country helps organizations to succeed globally.
The European Union (EU) lays down various rules which the member countries need to follow. These policies affect the functioning of the organizations in different ways. Pharmaceutical companies are also affected by the policies of the EU. Two UK based companies which have been extremely affected are GlaxoSmithKline (GSK) and AstraZeneca (AZ).
The legal barriers which were present during the functioning of a company in a foreign country are removed due to the policies that have been framed by the EU. The numbers of customers who are associated with each of the companies also increase because of the operation of the organizations in more than one country. Taxation policies are very important when an organization decides to get involved in trading practices (Wallace, Pollack and Young, 2015). Other policies that affect the business of a firm are cultural and regional policies. Registration of companies is important before starting trade practices. When the UK Government decided to cut down the prices of products in the pharmaceutical industry, GSK started to earn lesser amounts of profit.
It is also the responsibility of the European Union to ensure the food safety standards of the products that are being sold by the companies all over the world. The safety standards are put down by the Union which the companies are expected to follow. EU allows the selling of those products which are safe to produce and also safe to use. AZ introduced Zurampic for people with the problem of gout. EU allowed the selling of the product after an extensive search was done which ensured the safety standard of this particular product.
The Italian franchisees of McDonald’s complained to the EU that the company treats its franchisees unfairly. The company’s worldwide reputation is used the organization to charge extreme money from the franchisees. It charged the franchisees an amount of money which was almost ten times to the money that was charged by other companies. They were also not given the liberty to move to any other brand of their choice. The complaint was given to the European Union for proper measures. This association does not allow the operation of a particular company by hampering the businesses of smaller companies.
However, the people voted against the functioning of the European Union which is known as the Brexit (Dhingra, Ottaviano, Sampson and Van Reenen, 2016). Ever since the exit of the Union, UK has been facing a lot of instability in terms of its economic conditions. The foreign earnings have also suffered considerably.
It can be concluded that the European Union tried to operate for the smooth functioning of the organizations. But the voting out of the association, Brexit, has led to a considerable decrease in the economic turnover of the companies. The financial condition has become extremely unstable. The fluctuations of demand and supply with relation to the price of the commodities are studied at length. The functioning of organizations like GSK, AZ, McDonald’s and Tesco help to understand the factors that help the companies to enhance their profit margins.
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